"ARTICLE III-PETITION, AND POWERS of court

"SEC. 710. Any railroad corporation not in process of reorganization under scction 77 of the Bankruptcy Act which, either before or after the effective date of this Act, shall have (a) obtained an order of the Interstate Commerce Commission authorizing the issue or modification of securities, under section 20a of the Interstate Commerce Act, as proposed by a plan of adjustment (other than securities held by, or to be issued to, Reconstruction Finance Corporation), and (b) secured assents to such plan of adjustment from creditors affected by such plan holding more than two-thirds of the aggregate amount of the claims affected by said plan, which two-thirds shall include at least a majority of the aggregate amount of the claims of each affected class, may file its petition, stating that it is unable to meet its debts theretofore matured or about to mature and desires to carry out a plan of adjustment, together with a copy of said order of the Commission, with the district court in whose territorial jurisdiction such railroad corporation during the preceding six months or a greater portion thereof has had its principal executive or principal operating office: Provided, however, That in case a receiver of such railroad corporation has been appointed by a court of the United States and is in office, such petition shall be filed with the court having primary jurisdiction in such receivership proceeding,

"SEC. 711. Any railroad corporation which is entitled to file a petition hereunder, and which has itself complied with the provisions of (a) and (b) above, the majority of the capital stock of which having power to vote for the election of directors is owned, either directly or indirectly, through an intervening medium by any railroad corporation which has filed a petition hereunder, may file such petition in the same court in which the petition first aforesaid shall have been filed, and such petitions shall be heard and disposed of in a single proceeding.

"SEC. 712. The petition shall be accompanied by payment to the clerk of a filing fee of $100, which shall be in addition to the fees required to be collected by the clerk under other sections of this Act, or any other Act.

"SEC. 713. Immediately following the filing of the petition, there shall be convened a special court of three judges in the manner provided by section 266, as amended, of the Federal Judicial Code, and thereafter all proceedings relative to such plan or any modification thereof shall be conducted before such specially constituted court of three judges. Such court shall be vested with and shall exercise all the powers of a district court sitting in equity and all the powers as a court of bankruptcy necessary to carry out the intent and provisions of this chapter, including the classification of claims at such time and in such manner as the court may direct.

"SEC. 714. The special court, upon convening, shall enter an order eithter approving the petition as properly filed under this section if satisfied that such petition complies with this section and has been filed in good faith, or dismissing it if not so satisfied.

"SEC. 715. If the petition is approved by the special court as properly filed, the district court in which such petition is filed shall, during the pendency of the proceeding under this chapter, and to the extent necessary to carry out the purposes thereof, have exclusive jurisdiction of the railroad corporation and its property, wherever located.

"SEC. 720. The special court shall fix a date for a hearing to be held promptly after the filing of the petition and notice of such hearing or hearings shall be given to all creditors affected by the plan in such manner as the court shall direct. In such proceeding the court may allow such interventions of parties in interest as it may deem just and proper, but any holder of securities of the petitioner shall have the right to present evidence and he heard thereon, in person or by attorney, with or without intervention.

"SEC. 721. After such hearing the special court may approve the plan as filed or modify such plan and approve the same as so modified. If the court shall modify the plan in a manner which the court shall find substantially and adversely affects the interests of any class or classes of creditors, it shall be resubmitted to those creditors affected by such modification in such manner as the court may direct, and shall not be finally approved until after the action of said creditors thereon has been reported to the court.

ARTICLE V-PROCEEDINGS SUBSEQUENT TO APPROVAL OF PETITION "SEC. 725. If the special court shall be satisfied (a) that at the time of the filing of said petition as provided in article III hereof the proposed plan of adjustment had been assented to by not less than two-thirds of the aggregate amount of all claims of the petitioner affected by such plan, including at least a majority of the aggregate amount of claims of each such class; (b) that the plan of adjustment as submitted or as modified by the court has been accepted as submitted or as modified by or on behalf of creditors affected by such plan holding more than three-fourths of the aggregate amount of the claims affected by said plan, including at least three-fifths of the aggregate amount of the claims of each affected class; (c) that the plan is fair and equitable, is in the public interest, affords due recognition to the rights of each class of creditors and stockholders, does not discriminate unfairly in favor of any class of creditors or stockholders, and will conform to the requirements of the law of the land regarding the participation of the various classes of creditors and stockholders; and (d) that all corporate action required to authorize the issuance or modification of securities pursuant to such plan shall have been duly taken, it shall file an opinion setting forth its conclusions and the reasons therefor and shall enter a decree approving and confirming such plan and the adjustment provided thereby, which decree shall be binding upon the petition and upon all creditors and security holders of the petitioner and thereafter the petitioner shall have full power and authority to and shall put into effect and carry out the plan and the orders of the special court relative thereto and issue the securities provided by the plan without further reference to or authority from the Commission or any other authority, State or Federal, and the rights of all creditors and security holders with respect to claims and securities affected by the plan shall be those provided by the plan as so aspproved and confirmed: Provided, however, That the title of any owner, whether as trustee or otherwise, to rolling-stock equipment leased or conditionally sold to the petitioner, and any right of such owner to take possession of such property in compliance with the provisions of any such lease or conditional sale contract, shall not be affected by the provisions of this chapter.

"SEC. 726. After the special court shall have approved as properly filed a petition pursuant to article III hereof, the special court may from time to time, during the pendency of the proceedings hereunder, enjoin the institution of, or stay, any action or proceeding to enforce any right against the petitioner or its property based upon claims affected by the proposed plan of adjustment in any court, State or Federal, whether for the enforcement of any such claim or for the appointment o receivers in equity or of the institution or prosecution of a proceeding under section 77 of the Bankruptcy Act or otherwise: Provided, however, That no such stay shall affect any proceeding to enforce any claim which would be required to be paid if the plan of adjustment proposed by the petitioner were then in effect.

"SEC. 727. Unless the plan of adjustment as submitted or as modified shall have been confirmed by the special court within one year from the date of filing the petition, the proceedings shall be dismissed unless, for good cause shown, on motion of any party in interest the court shall determine otherwise.

"SEC. 728. Without prejudice to existing rights of all creditors, including those affected by the plan, the petitioner shall, from and after the filing of the application with the court and until final decree of the special court either approving a plan or dismissing the petition, as a condition to approval of any plan by the Commission and by the special court, continue to make or tender payment to all creditors affected by the plan of sums currently payable to such creditors equal to the amounts proposed to be paid to such creditors under the plan. In finally approving any plan the court may make or require to be made such adjustments with respect to said payments or any of them as may be necessary to make the same conform to the provisions of said plan as so finally approved.

"SEC. 729. In providing for any such payments the petitioner may require any bond or other security, including interest coupons affected by such payments to be presented or deposited with a depositary named by the petitioner for appropriate stamping to show the amounts and circumstances of such payment.

"ARTICLE VI-TAX PROVISIONS

"SEC. 735. The provisions of subdivision 1, 2, and 3 of schedule A of title VIII of the Revenue Act of 1926, as amended by sections 721, 722, and 723 of the Revenue Act of 1932 and of Public Law Numbered 842, Seventy-fourth Congress,

approved June 29, 1936, and the provisions of subdivisions 8 and 9 of the same schedule A, as added by sections 724 and 725 of the Revenue Act of 1932, and any amendments thereto, unless specifically providing to the contrary, shall not apply to the issuance, transfer, or exchange of securities, or the making or delivery of conveyances to make effective any plan of adjustment confirmed under the provisions of this chapter. No income, gain, or profit taxable under any law of the United States or of any State, now in force or hereafter enacted, shall in respect to the adjustment of the indebtedness of any petitioner in a proceeding under this chapter be deemed to have accrued to or to have been realized by such petitioner, or by any security holder of the petitioner, by reason of a modification of or cancelation in whole or in part of any of the indebtedness of the petitioner affected by a proceeding under this chapter.

"ARTICLE VII-INTERSTATE COMMERCE COMMISSION

"SEC. 738. If, in any application filed with the Commission pursuant to section 20a of the Interstate Commerce Act for authority to issue or modify securities, the applicant shall allege that the purpose in making such application is to enable it to file a petition under the provisions of this Act, the Commission shall take final action on such application as promptly as possible, and in any event within ninety days after the filing of such application.

"ARTICLE VIII-FINAL DECREE AND REVIEW

"SEC. 740. Any final order or decree of the special court may be reviewed by the Supreme Court of the United States upon application for certiorari made within thirty days after the entry of such order or decree, pursuant to the provisions of the Federal Judicial Code.

"SEC. 741. In the decree approving and confirming the plan the court may require such reports of the action taken by the petitioner thereunder in the execution of the plan as may be necessary to a final disposition of the cause, and in its final decree disposing of the cause the court shall retain jurisdiction in the district court to the extent necessary to protect and enforce the rights of the parties under said plan and the orders of the Court thereon.

"ARTICLE IX-SAVING CLAUSE

"SEC. 745. If any provision of this chapter, or the application thereof to any railroad corporation or circumstances, is held invalid, the remainder of this chapter, or application of such provisions to other railroad corporations or circumstances, shall not be affected thereby."

[Note: H. R. 3704 was subsequently amended and reintroduced as H. R. 5407. For convenience the text of H. R. 5407 is inserted at this point.]

[H. R. 5407, 76th Cong., 1st sess.]

A BILL To amend an Act entitled "An Act to establish a uniform system of bankruptcy throughout the United States", approved July 1, 1898, and Acts amendatory thereof and supplementary thereto

Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled, That the Act of July 1, 1898, entitled "An Act to establish a uniform system of bankruptcy throughout the United States", as amended, is hereby further amended by adding thereto a new chapter, to be designated chapter XV, and to read as follows:

"CHAPTER XV-RAILROAD ADJUSTMENTS

"ARTICLE I-JURISDICTION

"SEC. 700. In addition to the jurisdiction otherwise exercised, courts of bankruptcy shall exercise original jurisdiction, as provided in this chapter, for postponements or modifications of debt, interest, rent, and maturities or for modifications of the securities or capital structures of railroads.

"ARTICLE II-DEFINITIONS

"SEC. 705. The following terms, as used in this chapter, unless a different meaning is plainly required by the context, shall be construed as follows:

"(1) 'Petitioner' means any carrier as defined in section 20a of the Interstate Commerce Act, including any corporation in equity receivership, petitioning for a plan of adjustment, as hereinafter defined.

"(2) 'Claims' includes debts whether liquidated or unliquidated, certificates of deposits of securities (other than stock and option warrants to subscribe to stock), including demands and obligations of whatever character made, assumed or guaranteed by the petitioner.

"(3) 'Debt' shall be considered to include all claims held or owned by 'creditors' as hereinafter defined.

"(4) 'Creditors' shall include all holders of claims, demands, and obligations of whatever character against the petitioner or its property, whether or not such claims would otherwise constitute provable claims in bankruptcy, including the holders of claims made, assumed, or guaranteed by the petitioner.

"(5) 'Securities' shall include those defined in section 20a of the Interstate Commerce Act, as amended, and also certificates of deposit and all other evidences of ownership of or interest in securities.

"(6) 'Commission' refers to the Interstate Commerce Commission.

"(7) 'Adjustment' shall include postponements or modifications of debt, interest, rent, and maturities and modifications of the securities or capital structures. "SEC. 706. No creditor shall be deemed to be 'affected' by any plan unless such plan proposes a modification of the evidence of debt or other instrument defining the rights of such creditor, or a modification of the security, if any, for the claim of such creditor.

"ARTICLE III- -PETITION AND POWERS OF COURT

"SEC. 710. Any railroad corporation not in process of reorganization under section 77 of the Bankruptcy Act which, before or after the effective date of this chapter, shall have

"(1) Prepared a plan of adjustment and secured assurances satisfactory to the Commission of the acceptance of such plan from creditors holding at least 25 per centum of the aggregate amount of the claims affected by said plan of adjustment, and

"(2) Thereafter obtained an order of the Commission, under section 20a of the Interstate Commerce Act, authorizing the issuance or modification of securities as proposed by such plan of adjustment (other than securities held by, or to be issued to, Reconstruction Finance Corporation), such order of the Commission to include also a specific finding that such proposed issuance or modification of securities is in the public interest, is consistent with the continuance by the railroad corporation of service to the public as a common carrier, and will not impair its ability to perform such service, and

"(3) Secured assents to such plan of adjustment by creditors holding more than two-thirds of the aggregate amount of the claims affected by said plan, which two-thirds shall include at least a majority of the aggregate amount of the claims of each affected class,

may file in the United States district court in whose territorial jurisdiction such railroad corporation has had its principal executive or principal operating office during the preceding six months or a greater period thereof, its petition averring that it is unable to meet its debts, matured or about to mature, and desires to carry out the plan of adjustment.

"If a receiver of such railroad corporation has been appointed by a court of the United States and is in office, such petition shall be filed in the court having primary jurisdiction in such receivership proceeding.

"A copy of the order obtained from the Commission, as above provided, shall be filed with the petition and made a part thereof.

"SEC. 711. Any corporation which has complied with subparagraphs (1), (2), and (3) of the first sentence of section 710, and in which corporation the majority of the capital stock having power to vote for the election of directors is owned,

directly or indirectly through an intervening medium by any railroad corporation which has filed a petition hereunder, or any corporation which is a lessor of the petitioning corporation and which has complied with the aforesaid subparagraphs (1), (2), and (3) of section 710, may file its petition in the same court in which the petition first aforesaid shall have been filed, and such petitions shall be heard and disposed of in a single proceeding.

"SEC. 712. The petition shall be accompanied by payment to the clerk of a filing fee of $100, which shall be in addition to the fees required to be collected by the clerk under other sections of this Act, or any other Act.

"SEC. 713. Immediately following the filing of the petition, there shall be convened a special court of three judges in the manner provided by section 266, as amended, of the Judicial Code, and thereafter all proceedings relative to such plan or any modification thereof shall be conducted before such court. Such three-judge court shall be vested with and shall exercise all the powers of a district court sitting in equity and all the powers as a court of bankruptcy necessary to carry out the intent and provisions of this chapter, including the classification of claims at such time and in such manner as the court may direct.

"SEC. 714. The special court, after hearing, promptly shall enter an order approving the petition as properly filed under this section if satisfied that such petition complies with this section and has been filed in good faith, or dismissing such petition if not so satisfied.

"SEC. 715. If the petition is approved by the special court, the said court, during the pendency of the proceedings under this chapter, shall have exclusive jurisdiction of the petitioner and of its property wherever located to the extent which may be necessary to protect the same against any action which might be inconsistent with said plan of adjustment or might interfere with the effective execution of said plan if approved by the court, or otherwise inconsistent with or contrary to the purposes and provisions of this chapter: Provided, however, That nothing herein contained shall be construed to authorize the court to appoint any trustee or receiver for said properties or any part thereof, or otherwise take possession of such properties or control the operation or administration thereof.

"ARTICLE IV.-HEARINGS

In

"SEC. 720. The special court shall fix a date for a hearing to be held promptly after the filing of the petition and notice of such hearing or hearings shall be given to all creditors affected by the plan in such manner as the court shall direct. such proceeding, the court may allow such interventions of parties in interest as it may deem just and proper, but any holder of securities of the petitioner shall have the right to present evidence and be heard thereon, in person or by attorney, with or without intervention.

"SEC. 721. After such hearing, the special court may approve the plan as filed or modify such plan and approve the same as so modified. If the court shall modify the plan in a manner which the court shall find substantially or adversely affects the interests of any class or classes of creditors, such plan shall be resubmitted, in such manner as the court may direct, to those creditors affected by such modification and shall not be finally approved until after reasonable time, fixed by the court, is allowed for said creditors to be heard thereon.

"SEC. 722. If the United States, or any agency thereof, or any corporation (other than the Reconstruction Finance Corporation) the majority of the stock of which is owned by the United States, is a creditor or stockholder, the Secretary of the Treasury is hereby authorized to act in respect of the interests or claims of the United States or of such agency or other corporation. If in any proceeding under this chapter the United States is a creditor on claims for taxes or customs duties (whether or not the United States has any other interest in or claim against the debtor as creditor or stockholder), no plan shall be approved by the court if it provides for the payment of less than the full amount of such claim or provides for any postponement of such payment unless the Secretary of the Treasury shall certify to the court his willingness to accept a lesser amount or agrees to such postponement.

"ARTICLE V. PROCEEDINGS SUBSEQUENT TO APPROVAL OF PETITION

"SEC. 725. If the special court shall be satisfied

"(1) That, at the time of the filing of said petition as provided in article III hereof, the proposed plan of adjustment had been assented to by not less than two-thirds of the aggregate amount of all claims of the petitioner af